Sun Pharmaceutical Industries is the fifth largest specialty generic pharmaceutical company in the world providing high-quality, affordable medicines trusted by healthcare professionals and patients in over 150 countries.

It is also the largest Indian pharma company by revenues and market capitalization.

In India, the Company enjoys leadership across 13 different classes of doctors with 32 brands featuring among top 300 pharmaceutical brands It is the largest player in the India formulations market.

Sun Pharma has one of the strongest brand franchises in the chronic portfolio in India market. The key focus areas include CNS, dermatology, cardiology, oncology and ophthalmics, among others.

Sun Pharma entered the US generics market through its acquisition of Caraco and then expanded the product basket with the acquisition of Taro Pharma & URL Pharma.

Sun Pharma has grown inorganically mainly by acquiring stressed assets at cheap valuations. It has one of the widest reach to the medical fraternity in India with a 9,200+ strong sales force reaching around 600,000 doctors.

Sun Pharma acquired Ranbaxy through an all-equity transaction in 2015. The Ranbaxy acquisition has given a strong emerging market platform to Sun. Sun has in-licensed a Biologic product from Merck intended to be used in the treatment of the moderate to severe plaque psoriasis.

Sun Pharma share price

Sun Pharma share price: ₹423.65 (24th Jan 2019)

The 1 year data for historical share price of Sun Pharma:

Month Share Price
Jan’ 2019 390.75
Dec’ 2018 430.50
Nov’ 2018 492.60
Oct’ 2018 580.25
Sep’ 2018 623.25
Aug’ 2018 652.85
July’ 2018 568.50
June’ 2018 564.00
May’ 2018 480.35
Apr’ 2018 528.40
Mar’ 2018 495.10
Feb’ 2018 535.35

Key Acquisitions: For business growth

Year Deal Rationale
1997 Acquired Caraco For entering the US generics market
2005 Assets of Able Labs Formulation plant in Bryan Access to formulations plant (NJ, US)
2008 Acquired Chattem Chemicals, Inc Access to controlled substance facility with DEA registration
2010 Acquired Taro Pharmaceutical Industries Limited Enhanced presence in the US generics market, especially the dermatology segment
2012 Acquired DUSA Pharma, Inc Access to branded derma product
2013 Acquired URL’s generics business Addition to the US generics portfolio
2014 Acquired Pharmalucence Sterile injectable capacity in the US, supported by strong R&D capabilities
2014 In-licensing agreement with Merck for ILUMYA a biologic for psoriasis Strengthening the specialty product pipeline
2015 Sun Pharma – Ranbaxy Merger Fifth-largest Global Specialty Generics Pharma Company and No.1 Pharma Company in India with strong positioning in emerging markets
2015 Distribution agreement with AstraZeneca Distribution services agreement in India for brand ‘Axcer’® (brand of ticagrelor, used for the treatment of acute coronary syndrome)
2015 Acquisition of GSK’s Opiates Business Vertical integration for controlled substances business
2015 Acquisition of InSite Vision Strengthens branded ophthalmic portfolio in the US
2016 Distribution agreement with AstraZeneca Distribution services agreement in India for brand ‘Oxra’ and ‘Oxramet’® (brands of dipagliflozin, used for diabetes treatment)
2016 Acquired 14 brands from Novartis Entry into Japan
2016 Licensing agreement with Almirall for ILUMYA for Psoriasis Strengthening the distribution of ILUMYATM in Europe
2016 Acquired Biosintez Access to local manufacturing capability to enhance presence in the Russian market
2016 Acquired global rights for OTX-101 and Odomzo Enhances specialty pipeline

Growth Strategy of Sun Pharma

Cost Leadership

  • Optimize the operational cost
  • Vertical integration of the operations

Profit Balance and investments for future

  • Directing the future investments to differentiation of products
  • Increasing the contribution of complex and specialty products

Business Development

  • Ensuring acquisitions of high yield return on investment
  • Use acquisitions to bridge the gap of critical capability areas
  • Focusing on payback timelines
  • Focusing on product accessibility, market presence and technology

Creating sustainable revenue streams

  • Speed to market
  • Achieving differentiation by focusing on technically complex products
  • Enhancing share of specialty business globally
  • Ensuring global regulatory standards and sustainable compliance
  • Focus on key markets to achieve critical mass

Diversified Revenue base of Sun Pharma

Emerging Markets 19%
Weatern Europe and Other Markets 11%
API & Others 5%
US Formulations 34%
India Branded Formulations 31%

US Business at a glance

  • Sun Pharma is the 5th largest pharma company in the US Generics Market
  • It has a wide basket of 566 ANDAs & 54 NDAs filed and 432 ANDAs & 48 NDAs approved across multiple therapies
  • Sun Pharma stands as the largest generic dermatology company and amongst top 5 branded dermatology company in the US
  • The company offers liquids, Creams, Ointments, Gels, Sprays, Injectable, Tablets, Capsules, Drug-Device combination
  • It has a robust pipeline with 134 ANDAs & 6 NDAs pending FDA approval, including a combination of complex generics, FTF opportunities and pure generics
  • Employs integrated manufacturer with flexibility for manufacturing onshore/ offshore

Key Milestone in US Business

2018 Filed NDA for OTX-101 with USFDA
2018 Acceptance and approval for ILUMYATM (tildrakizumab) in the US
2018 Launched Generic Coreg CR® in the US
2018 Launched Odomzo in the US
2017 Launched BromSite – Sun Pharma’s first specialty ophthalmic product – in the US
2017 Acquired Odomzo – branded oncology product from Novartis
2017 Acquired Ocular Technologies – giving access to OTX-101, a product for treating dry eyes
2016 Acquired InSite vision to strengthen the specialty ophthalmic portfolio
2015 Expanded presence in the US with the addition of Ranbaxy’s US business
2014 Acquired Pharmalucence to get access to sterile injectables capability
2013 Acquired DUSA, marking entry into the specialty dermatology market
2013 Acquired URL’s generics business
2010 Acquired Taro Pharma and forayed into the generics dermatology market
1998 – 2010 Enhanced and strengthened the US business
1998 Entered into the US market by acquiring Caraco

India Business at a glance

  • Sun Pharma is ranked 1stwith 8.3% market share in India
  • Market leader in the chronic segment
  • Specializes in technically complex products and offers a complete therapy basket
  • Growth driven by a basket of brands – low product concentration
  • Strong positioning in the acute segment
  • 27 brands in the country’s top 300 pharmaceutical brands

Other Pharma Companies in India

Company Market Share
Sun Pharma 8.3%
Abott 6.3%
Cipla 4.5%
Zydus + Biochem 4.1%
Lupin 3.7%
Mankind 3.6%
Alkem + Cachet + Indchemie 3.5%
Torrent 3.2%
Glaxo 2.9%
Intas 2.9%
Macleods 2.8%
Emcure+Zuventus 2.6%

Key Financial Highlights of Sun Pharma

Summary of Profit & Loss                                                                                                              (in Rs mn)

Particulars FY17 YoY FY18 YoY
Sales 302462 9% 260659 -14%
Gross Profit 221335 3% 186413 -16%
EBITDA 87751 16% 51846 -41%
Net Profit 69644 53% 21616 -69%
R&D Expenses 23138 0% 22489 -3%

Summary of Balance Sheet                                                                                                         (in Rs mn)

Particulars FY17 YoY FY18 YoY
Shareholders Fund 366397 11% 381006 4%
Loan Funds 80910 -3% 97518 21%
Net Fixed Assets 149404 20% 157110 5%
Investments 11919 -35% 71430 499%
Cash and Bank Balances 151408 15% 99290 -34%
Inventory 68328 6% 68810 1%
Sundry Debtors 72026 6% 78150 9%
Sundry Creditors 43954 23% 47660 8%

Key Concerns for Sun Pharma

1. Concerns among investors for related party structure

The domestic formulations business of Sun Pharma is routed via Aditya Medisales Limited (AML), which became a related party in FY2018 due to shareholding consolidation; it was not a related party prior to that.

The company is in the process of discussing various options and is open to changing the distribution arrangement with AML if investor concerns remain.

2. SEBI Investigation

Sun Pharma faced a recent issue of a whistle blower case filed with SEBI. This issue coupled with earlier reported business challenges has led to sharp de-rating.

The lack of information on the whistleblower case alleging irregularities at the company and uncertainty related to the outcome of the reopening of insider trading case will continue to remain as a hangover on the stock.

3. Increase in Loans and Advances

The loans and advances given to employees in FY 2018 was Rs. 2,200 crore which the management has said to be given in a normal course of business at market rates. The management said that the loan was for a duration of two to two-and-a- half-years and had the potential to be reversed.

4. Other Key Risks

Delays in product launches or change in pharma policy or regulations in the U.S. can impact the company earnings estimates adversely.

Mutual funds holding Sun Pharma Shares

Some of the mutual funds who hold Sun Pharma in their portfolio are:

1. Axis Long Term Equity

2. DSP Small Cap Fund

3. UTI Healthcare Fund

4. UTI Mid Cap – Direct

5. UTI Value Opportunities

Disclaimer: the views expressed here are of the author and do not reflect those of Groww.